how do i tell a young mother me watching her son isent working out due to payments?

ok for almost a yr now i have been watching a young moms son he just turned 2 yrs.everything was fine at first i charged her 4.00 an hour it gave me xtra cash each week and saved her money ( she would end up oweing me anywere from 80.00 to 120.00 mon thru fri depending on her work ) then she applied for state help and recived it now i get paid threw the state..then i found out they dont take taxes out i have to, also there is a 500.00 start your own bussiness fee that i now would have to do come tax time so in the end i would owe 1000. and i was dealing with that and she does feel bad. well i just recived my first "pay" which was lower then what i thought. in reality im only getting 1.60 an hour. and make 52.00 a week. not to mention i do the creal, snacks,lunch..she provides diapers and wipes. most of me says this isent working and not worth it and im getting screwd and then theres the part of me that feels bad ( i really like her son and my son and hers play great together ) i dont know what to say to this mom so it helps both of us out. me paying in at the end of the year already stinks but not to make anything for a weeks worth of sitting is getting to me. i dont know what to do. im a stay at home mom my husband works hard we have bills and car payments insurence and kids not to mention my husband pays child suport so the 100 i would normaly make helped out alot. ( food, bills, gas ) i told husband i could work 3 days or part time a week and make more ,and they take taxes out. what do i do or say..any ideas would be helpful.